Credit Union Exam Solutions Presents With Flying Colors

Mark Treichel: Hey everyone.

This is Mark Treichel with another
episode of with flying colors.

I'm excited today to have the CEO of
member business financial services.

QSO Mark Ritter with me today.

Mark, how are you doing?

Mark Ritter: I'm doing great.

Thanks for having me looking forward to
the conversation and you can just call it

MBFS so I don't tongue tie you the whole

Mark Treichel: MBFS QSO.

And you're also a podcast host of the
credit of credit union conversations,

and I was fortunate enough to chat
with you a couple of weeks back.

And we have a mutual friend Vin,
Vin Vieten who helps me with my

clients and Vin and I were chatting
about some of your war stories from

back in the day, the other day.

But Mark, I want to, I've got your
bio here and just my, my audience

knows your extensive background.

I'm gonna, I'm gonna read through it here.

Mark is the CEO of MBFS and New
Directional Lending and an expert in

credit unions and business lending.

His primary role at MBFS is overseeing the
strategy of helping credit unions assist

members with business needs and consulting
with credit unions on planning the

delivery of services to their membership.

In 2002, Mark started a large Central
Pennsylvania Credit Union's business

lending program as one person and
a desk with no policies, products,

staff, systems, or business members.

That program grew to be one
of the top ten in the nation.

In 2012, he took on the challenge of
being the CEO of a business lending CUSO.

Mark was the fifth CEO in five
years for the organization.

That's a lot of turnover.

That's more turnover than the NCOA board.

At times, which lost many, which lost
money every month of its existence.

Since joining MBFS, Mark increased
the number of credit unions, the QS

in the QSO and revenue by over 10 X.

and ensured positive cash flow every
full year he's been at the CUSO.

More importantly, MBFS has helped
countless credit union members

gain the financing they need for
business and investment needs.

Mark's a native of Berwick,
Pennsylvania in Northeast Pennsylvania,

where he was a member of his high
school's nationally ranked and

state championship football team.

After high school, Mark hung up his cleats
to work for the Penn State Nittany Lions

full time as a student assistant while
attending Penn State as an undergrad.

During this time, Penn State transitioned
to the Big Ten and culminated in Penn

State's first Big Ten championship
and a trip to the Rose Bowl.

Mark remains an avid Penn State supporter.

Today, Mark lives in Bucks County,
PA, outside of Doylestown with

his wife and two teenagers.

Mark, I didn't realize that you
were a part of the Big Ten family.

I'm a golden gopher.

Most sports, probably everything
but hockey, you're probably

better than us right now.

Anyway welcome to the show, Mark.

Thank you.

Mark Ritter: And thanks for the audience
for putting up with my long bio makes

me think I have to shorten it up.

Minnesota is getting a

Mark Treichel: lot of
good information there.

Mark Ritter: Minnesota is getting
a little better every year.

And they got a couple sports that
they clip us on, but not too many.

Not

Mark Treichel: too many.

No, not too many.

Not too many.

Yeah.

2002.

You're at a credit union, they didn't even
have member business loans, and now you're

helping members all across the country,
and so Mark one of the things in our pre,

pre chat, we talked about how things have
changed in credit unions, in commercial

lending, et cetera, et cetera and, exams
back then versus exams today, why don't

you take me through a little bit of the,
of a timeline of the journey of different

things you've seen In commercial loans
at the QSO and as it relates to NCOA.

I, there's a lot loaded into that
question, but but let me know

Mark Ritter: your thoughts on all that.

Yeah and I'll give you
the point of comparison.

The industry has grown so much,
but I remember looking back.

Early in my career.

And when I started in Pennsylvania,
there was a total of 13 million

in business loans among every
credit union in Pennsylvania.

And most of those and funny as it
sounds, most of those were at the

Amish credit union who was doing
Amish business loans at the time.

Today there's credit unions that just do
deals bigger than that on a regular basis.

Sure.

So the industry was virtually nothing
and I knew enough at the time.

And I, okay.

I was your typical, at a community bank,
I knew, Oh, go out and talk and shake

hands, handshakes and everything, but.

But it was an incredible
opportunity because I had to learn

everything and everything systems.

I never wrote a policy.

I never wrote a policy.

And there were, there were virtually
no CUSOs at the time to help people.

And when you called a system person
and said you were from a credit

union, they looked at you like you
had three heads, you were literally,

this was Lewis and Clark in the
Wild West during that generation.

Sure.

And, but the one thing that I found is
the credit unions had an awful lot of

members who were small business owners.

And needed and they like their
credit union, but they just

didn't do it at the time.

So it was such a fascinating experience
because you had this such strong

affinity of, people who love our
credit unions and, but they couldn't

go to the credit union at the time.

Sure, and really what I found from N.

C.

U.

A.

At the time, and you could probably
back me up on this is they didn't

know what they didn't know, even at
the time, and I always say when we

talk to each other, it was like an
8th grade dance because we were both

staring at each other with nothing.

Nobody knew what to do.

Mark Treichel: And you think about
that, it's they're self employed.

So you need to have the
tax return in the file.

So thinking, putting my, my, my time back
when I was an examiner at the time and

then then you'd go through the phase of,
okay you got the tax return, whether it's

a self employed or it's the business now.

Now we need to understand what
that means and adding back

depreciation and what does that mean?

And, an NCUA when I was in, let's see,
I started in 86 somewhere between 86

and 89, maybe 90, I went down to LSU
for two training classes because NCUA

was starting to see commercial loans.

There was a big credit union
in Texas that had caused some

problems for the insurance fund.

Which then turns into, Hey, we
did need to step up our training.

So they sent us down to the LSU
school of banking of the South.

I remember a teacher there, Willie
Stotts looked a little bit like

Groucho Marx, fabulous teacher.

And, he's giving an example about
when he worked at a bank and they had,

he took over some troubled credits.

And they had made loans to a chicken
farm and he started talking about,

you got to keep the chickens alive and
you got to get the feed and all these

different things that, that his bank
didn't understand when they made these

loans that you might end up with the
collateral, and NCUA raised the bar

collectively or individually of different.

People and it might have been when I
was a problem case officer that I went

to that training, but I learned enough
there maybe to be dangerous, but I

learned enough there to raise the bar,
raise that conversation from an 8th

grade conversation to maybe 11th grade in
the summer between 11th and 12th grade,

perhaps where we were able to, I was
able to ask some questions, which led

the credit union to ask more questions
of their members, et cetera, et cetera.

So that ring any bells the
thoughts of, the transition to.

To tax returns.

And then now we're in the
world of global cash flows.

Mark Ritter: The funniest piece from
those days is, we were at a large

credit union and we were about an
hour and a half from Alexandria.

And I noticed all of us, like I was just
getting NCUA exams and people reviewing

my files, like more than any other
time that I've ever had in my life.

And finally I sat down and I asked
them, I said, let me ask you this.

Are you just sending people
here to re to train them?

And they said, yes, that's
exactly what we're doing.

I go, cause we're the only ones doing
business loans in any volume at this time.

They're like, yeah, there's nowhere
else we can go in this region.

So I said, Oh, okay let's sit down
and work together and I'll guide you

through a file and talk about what we
do rather than me just slapping a file

on you and coming back with a bunch
of comments that don't make sense.

So really my, my outlook on that is much
more of a partnership and conversation

versus combativeness because, the
commercial lending side and even the

small business lending piece, it's much
more of an art form and subjectiveness.

As compared to a mortgage loan where these
are the 20 things that need to go into it.

Here's the compliance.

This mortgage loan looks exactly like
the next mortgage loan, and I think

that's probably the piece that examiners
struggle with more than anything else

as a well as the credit union and.

Credit unions, what we really figured
out at that time is you really have

to make it a story for somebody
to open up with who can understand

it and have a conversation with.

Mark Treichel: Yeah, here's the narrative.

Here's the write up on that
loan with why it makes sense.

And I asked these questions and I had
these follow ups and I, we, I mentioned

Vin Vieten and Vin has talked a lot about.

It's like he viewed his role when
he was, before he came to NCA and he

worked as a lender, he viewed it as
a, really an opportunity to help the

small business understand how they could
see succeed because of the interview.

It was like a free consultation,
if you will, that, have you thought

of this and you have thought
of this, cause if I'm going to.

Look, if you're going to get money
from me, I need to understand

that I'm going to get it back.

So if I'm thinking this is how I might
get it back and I pass these things on to

you, you can improve their thought process
on how to make their business succeed.

Mark Ritter: That's exactly right.

And really, and at this point too, the
piece that we were lifting up is you have

the lender And the business, but we're
also educating the regulators, the board,

the senior management on how we can help
everybody succeed, improve the local

economy and bring everything together.

And I think that's the one piece
that credit unions as the industry

matures is that, never forget
at the end of this food chain.

There's a small business who has
hopes and dreams and a mission of

really improving their life, having
improved employees and don't forget

that piece of it, which is why we're

Mark Treichel: here.

Sure.

Sure.

And that business is contributing to the
community, whether it's two employees

or 25 employees that need to get paid
every Friday or every other Friday.

Which, which keep the economic
engine of this great country

that we that we live in going.

Absolutely.

I, can you think of any specific examples
of a, an aha moment of on a type of loan?

Like right now you can read in the
wall street journal, you can read

in, in Bloomberg, there's this
anxiety about office space, which

is a certain type of business loan.

And then there's, there's.

Collateral based lending,
which might have a crop loan.

When I was an examiner, one way I learned
some things was I had some farm credit

unions because I was from Minnesota
and the whole board was farmers.

The credit committee was farmers.

And if they were given a tractor
loan, they understood it.

And I learned from them.

And if they had a crop loan.

I remember the first concept.

Guess what?

The crop loan it should be paid
off every at the end of every crop.

And so these different nuances can you
think of any examples or aha moments

of certain types of loans where where
you were able to move the ball forward

relative to something along those lines?

Mark Ritter: Yeah, a absolutely and I
can think of the great recession and.

I never did as high quality of
loans as I did during as any time,

except during the great recession.

Those are the best loans
that I have ever done.

And really, I can think of 1 RV dealership
that we helped restructure at during the

great recession and roll back in time.

Not unlike today.

Where people just weren't lending and
there was a, there was, there was a

demand issue and then there, and people
weren't lending and we had a very well run

business, very well run business that was
struggling with the manufacturers because

of the because of the great recession
and, you What we were able to do was go

in and look at his business on a micro
level micro level, understanding him,

his customers and put together a package.

And for years after that, as I talked with
him, he always, every time I talked to

him, he said, mark, you saved my business.

You saved my business.

And that's where.

I tell people, credit
unions have the advantage.

If you're a national bank, if
you're a super regional bank, you're

lending into these large buckets.

And delinquency in certain
areas is increasing.

It was, things like office space.

But that doesn't mean delinquency is 100%.

And in your you have the advantage
of getting into your members in your

towns, in your neighborhoods and making
decisions based off of individual

fact versus saying, and I'll give
you I'll give you my peeve example.

People always say, I don't
lend to gas stations.

Why?

Too much risk.

If the only thing I did was lend
to Sheetz and Wawa gas stations

on the leases, my life would be
very boring and very profitable.

There's gas stations
that don't make sense.

There's aging gas stations,
but it's not 100%.

And really during that great recession
is that's when I really learned that

you need to dig in on a micro level
and be a credit union for your members

and not just say, we're turning our
back on this segment of the community.

There's very few, unless you're a
video rental company, that was dying

and going away, there's very few
industries where just 100 percent

of the people are going to go bad.

Sure,

Mark Treichel: sure.

There are no absolutes, right?

And if you're gonna, if you're gonna
write off every business it's like the the

thing in Congress where bond owners were
having difficult getting bank accounts.

And I, there was a
congressional hearing on it.

It's no, we don't say that
they can't have business.

But the, but when the government came
out with some guidance, all the big

banks were just like, you know what?

We're not going to deal with them.

We're not going to look.

We're not going to look
at them individually.

We're going to look at them collectively
and say the juice isn't worth the squeeze.

In credit unions it's
about serving everybody.

And so taking the time to understand
them, that RV story is It's a great a

great example of how credit unions can
help, my internet cut out right there

for some reason, Mark, could you repeat
what, could you repeat what you just

Mark Ritter: Yeah.

So that's what I really enjoy with credit
unions and why I love what I do is just

because of that, we can talk to people
and make, yeah, you always have to have

the financials always have to make sense.

That's a given.

But to me, it's more about the story
and understanding the business.

And the relationship and how
it can fit into your strategy.

And sometimes I think we lose that
as the industry matures because we

have, people just want to say, okay,
let me just look at the financials.

Or maybe we have some newer people that
I you know, I reminisce about these days

where the industry's gotten so large.

Maybe we're just lending in that box
of, I just want to do these deals,

but I just think we're missing.

The opportunity and who we are as a credit
union, because, way back when, the N.

C.

U.

A.

put us in a box and we had very
little flexibility about what

we do and today I always say.

The last thing in your way of a
successfully serving business members

is the NCUA because they have never
been more flexible and given people more

freedom to do what they want to do today.

Now with that comes great responsibility.

You cannot blame the, there's
always that straw man, the NCUA.

Why we can't do that.

That does not exist today
when serving businesses.

Mark Treichel: Yeah, that's a great point.

And there was the old rule, for
example, that said your LTV had

to be 80 percent and you could
get a waiver if it was over that.

And then they shifted to a more
principled based approach to what

your policies have to include it.

And, what your staff skill sets
have to be as opposed to you, it

having to be spelled out the way
the regulation said it used to be.

Yeah, I agree that the regulation has come
a long way and NCWA has come a long way.

Relative to giving credit unions the
opportunity to best serve their members.

But like you said, a lot of
responsibility that, that comes with that.

The QSO, a lot of different
credit unions own it.

And how does that structure all work?

Is it to gain access to participate
it, you have to be an owner

or how does that structure all

Mark Ritter: work, Mark?

So mbfs is owned by 13 credit
unions, but we work with more

than 100 credit unions nationwide.

So we try to make it very easy
for people to work with us.

And what I always say is, accused.

So like us.

It can be a few different people
should really use a QSO or the gain

efficiencies and I think that's one
of the main pieces of, these systems

that we have are expensive and to gain
to get to big to gain access to scale.

We help with participations.

We help with originations.

We can make your program grow much bigger.

It used to be.

That you went to a QSO for expertise,
and I would say people should go to their

business lending QSO for niche expertise.

You can't be an expert on everything,
but a lot of times people encounter

a situation or they're running into
some difficulty, you could call

us up and say, what do you think?

You shouldn't be going to a QSO
for what I'll call base expertise.

Like you used to 20 years ago, 20 years
ago, you could say who's the expert

and you would point at the QSO and
said these guys tell us what to do.

It's not like that anymore.

You have to understand what you do on
the basic level and stay within that

box, but we really can help grow.

And do it much more efficiently
than maybe doing everything

Mark Treichel: internally.

Very good.

Very good.

And if Looking forward.

So there's what it used to be,
back at the beginning, there's

the progress everybody's made.

What do you see 2024, 2025 and
beyond for the QSO and or for

commercial lending and credit unions?

Mark Ritter: You made a good point where
there was always this rule of 80 percent

LTV and what that jammed the industry
into was being a real estate lender.

We would do any loan as long as
it had a piece of real estate.

And I think the sh and the shift
is going to be, or I think it

should be, and it's, and it'll help
people to shift to much more of

relationships over commercial lending.

You want relationships where
they're bringing you the deposits.

You want relationships.

SBA lending is the best program out there
that our federal government has, and

it's the most underutilized by credit
unions, other than a couple niche players.

You can help people grow their business
with a properly managed line of credit.

And they probably have a building
that they need to refinance too.

10 percent of the businesses
out there own their building.

We can help people a lot more by focusing
on relationships, focusing on deposits,

focusing on loans to small businesses, and
not just saying it's a better loan because

I have a piece of real estate behind it.

Excellent.

Mark Treichel: Excellent point.

And deposits are becoming, we're in an
environment right now where deposits

growth is as tight as it's ever been.

So that relationship and the ability
to bring over all the business is

a real opportune time right now for
credit unions as it relates to that.

Mark are there any questions today that
I haven't yet asked you that perhaps

Mark Ritter: I should have?

Yeah I think I really liked talking
about the future and I could rem,

we could both reminisce the war
stories of commercial lending exams

from 30 years ago, but I think we'd
bore people after a couple hours.

I really just think people, like I
said, just reiterate that focus on the

business focus on relationships, but
also today, keeping in mind is that.

Your loans, your it's in, it's all
about a portfolio strategy and not

individual loans and you're, you can't
just make the same loan a hundred times

over and say, I have a good portfolio.

You need a balanced portfolio with a
nice diversified mix whether that's

participations, business loans, different
industries, different geographies, if you

just make the same loan a hundred times
over to a hundred different borrowers,

that's not a diversified portfolio.

That's a

Mark Treichel: great point.

Yeah.

And I've had conversations recently
with clients relative to pointing out

to NCUA that they do have a diverse
commercial loan portfolio because they

do, 10 different varieties of loans
and then building, and looking at that

as it relates to concentration risk
and looking at that as it relates to

net worth and all sorts of things.

And 101 type alone is not diversity.

Mark Ritter: And so many people, our
industry has grown so much and the

expertise level, but sometimes when we
bring in the new outsiders, many of them,

if they came from a commercial bank.

They tend to have that sort of mentality
where it's not as cooperative and sharing.

So if you're listening to this
from a commercial bank, it's

okay to share with people.

It's okay to learn from people.

It's okay to cooperate with people.

And you're, and you don't have to.

Hide everything and it's okay to
work together where you maybe didn't

do that in some of your past life.

But other than that, I had a great time.

Thank you for

Mark Treichel: having me.

Mark, I want to thank you for being on
the show and providing your insights.

Now, if someone, one of my listeners
wants to reach out and talk to you

about the QSO or your podcast what's
the best way for someone to reach you?

Mark Ritter: Sure please subscribe
to Credit Union Conversations on

your favorite audio platform just
and you can do that the second after

you hit subscribe for this podcast.

Please yeah, that's the easiest way to
make sure we come up on your feed to work.

But we would love to talk to you
about your portfolio and program

to see if it's a fit at mbfs.

org.

You can also check out my
personal website of markritter.

com.

But a lot of people message me.

I'm very active on LinkedIn as well.

Just search Mark Ritter on LinkedIn
and you'll find me that's great, Mark.

Mark Treichel: And I'll put those contact
points in the show notes for this episode.

And I want to thank you
again for your time today.

Thank you.

Very good.

And listeners, I want to thank
you as always for listening.

I hope you'll listen again soon.

This is Mark Treichel signing
off with flying colors.